How HMRC will transform the tax system, so that it is more effective, more efficient and easier for taxpayers.
The government is committed to reducing burdens for taxpayers and building a transparent and accessible tax system fit for the digital age.
At the March 2015 Budget, the government set out the vision for a transformed tax system and the end of the tax return.
Making Tax Digital sets out how this bold vision for the future of the tax system will be achieved by 2020 through the transformation of HM Revenue and Customs (HMRC) into one of the most digitally-advanced tax administrations in the world.
Making Tax Digital will represent significant changes to the way in which the tax system will operate. These changes will put customers at the heart of what HMRC does going forward. We do not underestimate the scale of these reforms and are introducing them gradually between 2018 and 2020, because we know how important it will be to get them right and to give individuals and businesses time to adapt.
Easing the transition to digital
We have been listening to stakeholder concerns about the introduction of Making Tax Digital. As a result, we have made a number of changes to the proposed design to ease the transition to a digital tax system.
More details are set out in the consultations we published in August 2016, but key changes include:
- removing more of the smallest businesses from the requirement to keep digital records and update quarterly. We will exempt all unincorporated businesses and landlords with a turnover under £10,000 a year
- referring the start of Making Tax Digital for some other small businesses, giving them extra time to get used to digital record keeping and quarterly updating
- exempting digitally excluded businesses from digital record keeping and quarterly updating
- ensuring flexibility for how businesses manage their accounts and introducing simplifications, for example extending cash basis accounting to more businesses
Illustrative case studies
The case studies above illustrate how Making Tax Digital will affect different customers.
And this short animation shows how Making Tax Digital will work in practice for a small business:
HMRC held informal discussions with stakeholders on simplifying payment arrangements for taxpayers during January and February 2016. These discussions helped inform part of our Making Tax Digital announcement at Budget 2016 and helped frame the Making Tax Digital: Voluntary pay as you go consultation document.
The supporting discussion paper which explored moving towards a simpler and more aligned payment system for tax has been archived.